Market Monitor, Wednesday, 12/26/2007

The daily charts of the 4 indices I follow show a little more upside potential before potentially running into stronger resistance. Ideally we'll see a pullback tomorrow and then press higher on Friday, as shown on this SPX 60-min chart: Link
. For perspective you can see the potential sideways triangle that calls for another drop back to the bottom of it near 1420: Link

The COMP shows the possibility for completion of an a-b-c bounce off the Nov 26th low at 2749: Link
. The RUT achieved two equal legs up on Wednesday at 797.70 so it's possible it already topped out. A drop much below 790 could be potentially more bearish (120-min chart): Link

OI Technical Staff : 12/26/2007 9:59:59 PM

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Keene Little : 12/26/2007 4:06:11 PM

We could be in for a little more chop tomorrow as the wave count finishes putting in a 5-wave move up from Dec 18th. Ideally we'll see it make it up to its downtrend line from October, currently near 13670, before setting up the next decline or just a pullback. Stay bullish for now. Link

Jeff Bailey : 12/26/2007 4:05:40 PM

Current OPEN MM Profiles that I've made and Watch List found at this Link

Linda Piazza : 12/26/2007 4:04:13 PM

The notations about what would be happening in Japan are due to the importance of keeping up with global developments. The housing crisis and fears about our economy have stayed the BOJ from raising rates, but you must keep up with what's happening in Japan because that could impact the euro/yen and USD/yen, and that could in turn impact the behavior of U.S. equities through the yen carry trade.

Keene Little : 12/26/2007 4:03:05 PM

Golf clap for the Boyz--looks the DOW will settle a little better than +1 on the day. Whew.

Keene Little : 12/26/2007 4:01:16 PM

Come on Boyz, don't let the DOW drop in the last minute. You can do better than this.

To point out the difficulty in the housing market in Japan, the annualized housing starts figures in Japan have resulted in annualized drops of 23.4, 43.3, 44.0 and 35.0 percent in July through October. From 121,149 starts in June, the figure dropped to 76,920 starts in October.

Linda Piazza : 12/26/2007 3:51:16 PM

Tonight's developments in Japan include the following:
At 1300 (GMT? The site doesn't specify), the Japan Automobile Manufacturer's Association releases November production and export figures; and at 1400, The Ministry of Land releases November's housing starts and construction orders.

Japan has had a housing crisis of sorts, but that's been due to a change in some sort of law or regulation. I haven't been able to find out much information about it, just learning about it through an oblique reference in a webcast about a week ago. The law or regulation is supposedly going to be reversed, but there's much speculation as to how long it would take for the housing market to rebound, if it does. So, this could be important information, but any weakness's impact could depend on how much credence market participants put in the belief that the law or regulation's reversal will improve matters.

MBA's Weekly Application Holiday Schedule ... Due to the upcoming holidays, MBA's Weekly Applications Survey normally released on Wednesday, Dec. 26 EMBARGOED until Thursday, Dec. 27 at 7 AM and the following week on Wednesday, Jan. 2 EMBARGOED until Thursday, Jan. 3 at 7 AM. The original schedule will resume on Wednesday, Jan. 9.

Linda Piazza : 12/26/2007 3:25:54 PM

The chart linked to my 3:18:27 post shows the VIX testing key support, the same moving average it was testing Oct. 9-11. I noted what bulls did not want to see in that post. Let's put it in different terms now. What bears do want to see is the VIX maintaining support on its 200-sma and then bouncing strongly, just as it did in October. What they don't want to see is the VIX cascade lower through that support, staying below the 200-sma for an extended period, as happened from September, 2006 through March, 2007.

Jeff Bailey : 12/26/2007 3:25:47 PM

MM - 12/21/07 at 12:09:14 ... VIX was 18.91 and sitting on its 200-day SMA.

SPX was starting its surge. SPX now 1,496.56 (unch), with its 200-day SMA 1,489.36.

Do you ever look at indices such as the VIX on traditional charts? If not, you might not realize that the VIX is hovering at its 200-sma, today, trying to maintain that moving average's support (as it did on 10/09-10/11). It's finding resistance at the 200-ema over the last couple of trading days, just as it did for a couple of days in October, from 10/09-10/10. Think such things as moving averages don't matter on the VIX? Take a look and see what you think after scanning a chart: Link
Obviously, SPX bulls do not want this support to hold and the VIX to bounce strongly from this tested support, as it did in October.

Jeff Bailey : 12/26/2007 3:18:03 PM

RICHMOND FED'S MANUFACTURING INDEX SLIDES

DJ- Economic activity in the Richmond region contracts in December from a flat reading the previous month, with the Richmond Fed's manufacturing index falling to -4. Its shipments index sinks to -10 from 1 in November. New orders also drop.

Las Vegas, Los Angeles, Miami and San Diego have been hard hit in recent months.

Keene Little : 12/26/2007 3:11:12 PM

GOOG has made it up to its downtrend line from November and could now start either the next decline (bearish wave count) or just pull back to the bottom of a bullish triangle pattern, near 680, before another rally to new highs (bullish wave count): Link

Jeff Bailey : 12/26/2007 3:08:42 PM

US HOME PRICE GAUGE POSTS RECORD DROP

DJ- Home prices in 10 major U.S. cities fall a record 6.7%; the previous largest decline was 6.3% in April 1991, according to the Case-Shiller price index. And prices in 20 major U.S. cities drop 6.1% on average.

In this kind of market, you absolutely do not want to let a winning trade turn into a losing one.

There have been times in the past when I've deliberately chosen to limit a trading account's size. Perhaps I was trying out a new trading style, market conditions changed, or I was experimenting with a new vehicle, as when happened when my former favorite, Enron, went under, and I switched to the OEX or when I decided to experiment with currencies for a short time. I figured with the currencies, at least, that I was going to lose some money (I was right) learning that new vehicle, and I wanted to limit what I would lose.

Unless rules are changed since those times, I know that those of you with small trading accounts are limited to how many options trades you can enter and exit in a week's time. I know the temptation not to lock in profit if you think there might be a bounce after a pullback, because you have a limited number of round-trip trades per week and you don't want to use them up. Been there and done that, and it doesn't lead to an increase in your trading account! You must trade based on the merits of the trade and not any other parameters. If conditions develop that make you believe that profits should be locked in and if that's what you'd do if you had a million-dollar account, then that's what you need to do if you have a $3,000 one, too. If a trade is going wrong and you'd exit and watch for a better opportunity if you had a million-dollar account, then that's what you need to do in your $3,000 account, too, even if it means you can't trade the rest of the week and won't have the opportunity to "make up" a loss.

Keene Little : 12/26/2007 3:05:53 PM

AAPL continues to make progress towards a Fib target at 205.54 for its 5th wave in the rally from its November low (daily chart update): Link
. Looking more closely at that 5th wave up from Dec 18th, the 60-min chart shows we should get a pullback (looks like it needs a minor push higher first) and then a final 5th of the 5th wave to complete its rally: Link
. Perhaps a pullback tomorrow to set up the final rally.

Linda Piazza : 12/26/2007 2:57:25 PM

Tentative bearish price/RSI divergences are showing up a the SPX climbs to retest Monday's late-day high. These are not trustworthy predictions that the SPX is going to roll over right now. The RUT has been producing them all day today as it broke out to a new high and keeps climbing, for example. What these divergences are good at doing is to allow you time to formulate a profit-protecting plan if you're in long positions and to think about what you'd want to see before you entered a bearish one. Then, you can watch to see if your need to employ your profit-protecting measure occurs or if the price action you wanted to see for a bearish trade unfolds. If not, no harm, no foul.

Keene Little : 12/26/2007 2:54:19 PM

The Boyz are going to close the DOW in the green today even if it kills them.

The USDJPY is not invalidating that potential H&S but neither is it confirming it. As I said earlier today, it needs to confirm that H&S by either the close of trading today or by early after the open tonight or else I'll consider it invalidated after all, whether or not the value climbs above the right-shoulder area. That's because the shoulder will have stretched out too far in time, showing that the bears didn't have enough strength to confirm it.

Jeff Bailey : 12/26/2007 2:23:10 PM

Swing trade call filled alert! ... for the two (2) KSS-BJ at $1.20.

Jeff Bailey : 12/26/2007 2:21:38 PM

AAPL ... updated "stacked retracement" from a couple of weeks ago at this Link

Well so much for my analysis of this Gold chart. I truly thought resistance would hold based on the US$ chart. Link

Jane Fox : 12/26/2007 2:16:42 PM

Today's trading, although very slow, is strongly suggesting the potential right shoulder is not going to be a right shoulder. Link

Linda Piazza : 12/26/2007 2:10:30 PM

The RUT has been leading the charge, at least when seen on a 15-minute Keltner chart. Its breakout mode has been maintained for three days. It's going to be time to come down to Earth sometime, so keep an eye on the RUT. RUT bulls don't want to see pullbacks result in 15-minute closes sustained below 792 or especially a daily close beneath 791.47.

Jeff Bailey : 12/26/2007 2:10:02 PM

Apple Trades $200!

Keene Little : 12/26/2007 2:04:48 PM

Another nice little shot in the arm for the bulls. These little buying spikes are being accompanied by some increased volume so that supports the bulls for now. But the price pattern for today's rally is now a 5-wave move and that warrants caution by those who bought today's rally. At a minimum we should now be close to getting at least a pullback.

The VIX is bullish today and is confirming the S&P futures' new daily highs. Link

Jeff Bailey : 12/26/2007 1:51:17 PM

US 2-year Notes: 3.285%; 75.98% At High

DJ- The U.S. Treasury awarded $22.00 billion in two-year notes at Wednesday's auction at a high rate of 3.285%.

The Treasury received bids totaling $49.06 billion and accepted $22.00 billion, including $525.06 million of noncompetitive tenders, down from $617.03 million in noncompetitive tenders accepted at the previous two-year note auction on Nov. 28.

The Treasury received no bids from foreign and international monetary authority accounts on a noncompetitive bidding basis.

The bid-to-cover ratio, an indication of demand, was 2.23, Treasury said.

Tenders submitted at the high yield were allotted 75.98%.

The dollar price was 99.932783 and the coupon rate was set at 3.250%, or 3 1/4%.

The median rate was 3.241%; that is, 50% of the amount of accepted competitive bids were tendered at or below that rate.

Of the competitive bids accepted, 5% were tendered at or below the rate of 3.176%.

Accepted indirect bids for the two-year note were 26.0% of the total, up from 24.4% in November.

he high rate was up from 3.159% at the previous two-year note auction. The high rate was the highest since 3.723% at the two-year note auction on Oct. 24.

The issue is dated Dec. 31 and matures on Dec. 31, 2009.

The CUSIP number on the two-year notes is 912828HL7.

Jeff Bailey : 12/26/2007 1:33:23 PM

Swing trade call alert! ... for two (2) of the Kohls KSS Feb $50 Calls (KSS-BJ) at a bid of $1.20 ($1.15 x $1.30). No stop for now, target $2.60 in the option.

KSS $45.36 -2.24% ...

Linda Piazza : 12/26/2007 1:04:17 PM

It looks as if there's about to be a second 15-minute SPX close above the 9-ema. In my opinion, the USDJPY's trader's inability to send the currency pair down to confirm its head-and-shoulder formation was a heads-up that bears didn't have a lot of strength to produce downside follow through. (See my 11:05:14 post.) Neither do we have great proven strength, either, though.

Keene Little : 12/26/2007 1:02:07 PM

Gold has had a nice rally today and as Jane observed earlier this morning it has broken out of its sideways triangle pattern. This is normally very bullish but I'm hesitating on recommending a long play in gold. There are a couple of reasons I'm watching this closely rather than jumping in long: Link

First, the US dollar and euro look like they've made an important turn (the dollar looks like it's bottomed and the euro looks like it's topped) and while they're each correcting I'm not so sure it will help gold. The dollar has so far only pulled back to the mid line of its down-channel from 2006 (getting back above it was bullish) and its new uptrend line from the November low. A bullish dollar is bearish for gold. Link

Second, the gold bugs index (HUI.X) has only made it up to its downtrend line from its November high and has been leading to the downside in its decline from that high. This normally leads the metal and I don't see anything bullish in its chart yet, especially if it rolls back over now that it has retested its downtrend line and a potential broken neckline of a H&S top since October. Link

This potentially makes gold's rally today a bull trap. So I'll watch for a little longer.

Keene Little : 12/26/2007 12:55:38 PM

Even though the consolidation looked like another leg down was coming (and still could), the little buy program here is why you don't short a dull market. It's too easy to manipulate. Now we'll see if this is just a little bull trap.

Jeff Bailey : 12/26/2007 12:54:33 PM

Unable to get ahold of my retail shopping analysts (Kendal and Kellany) at this point. Checking pulse at malls here in Denver, CO. Gift cards were burning a hole in their pockets yesterday.

Linda Piazza : 12/26/2007 12:41:03 PM

The TRAN is just off its low of the day. So far, it's still bouncing off potential Keltner support that extends down to 4639.06 on 15-minute closes. It's at 4650.81 as I type. On a Keltner basis, it's been weaker than the SPX today.

Jeff Bailey : 12/26/2007 12:20:56 PM

TRINQ 0.72 ... WKLY Pivot 1.14. DAILY R2 0.886.

Jeff Bailey : 12/26/2007 12:16:51 PM

V.C. = Venture Capital

Jeff Bailey : 12/26/2007 12:15:53 PM

DJ- SOMETHING VENTURED - Investors In Biofuels Head South ... Investors in alternative energy are eyeing opportunities in Latin America as feedstock costs squeeze U.S. margins, with V.C. firms Khosla and GreatPoint financing Ethos, which plans biofuel plants in Latin America and the Caribbean.

Jeff Bailey : 12/26/2007 12:14:12 PM

BOEING AMBITIONS MAY BE HIT BY DEFENSE CUTS

DJ- When NASA picked Boeing to build as much as $1.2 billion of satellites, analysts and the company said it would bring a boom to its aerospace business. But the survival of the Pentagon's program now appears increasingly in doubt.

TRIN is +1.32, which is bearish but it is not making new daily highs. AD volume is making new daily lows but the AD ratio is not. VIX is lollygagging and not talking today. All the more reason to take your dog for a walk.

Jeff Bailey : 12/26/2007 12:08:12 PM

RETAIL SALES FALL, GIFT CARDS DELAY HOLIDAY SHOPPING

DJ- National chain store sales fall 0.7% in the first three weeks of December, according to Redbook Research. Drop in the index compares to a targeted 0.8% drop. Seasonally adjusted sales rise 1.3%, beating a target of a 1.2% gain.

Jane Fox : 12/26/2007 12:08:11 PM

I have closed my trading Desktop to ensure I am not tempted to take and trades for that would be a really bad idea today.

Jeff Bailey : 12/26/2007 12:07:34 PM

LAST-MINUTE SHOPPERS HELP US CHAIN STORES

DJ- ICSC-UBS Retail Chain Store Sales Index rises by 2.8% in the week to Dec. 22 from its level a week before. Result follows a 1.4% rise in the prior week. ICSC warns that the industry sales gain might not meet its original guidance.

Jeff Bailey : 12/26/2007 12:06:58 PM

TURKISH JETS STRIKE KURDISH REBELS IN IRAQ

DJ- Turkish warplanes hit eight suspected Kurdish rebel hideouts in northern Iraq, the third cross-border air assault in 10 days. Turkey's military has hit more than 200 Kurdish rebel targets in the area since Dec. 16, killing hundreds of rebels.

Jane Fox : 12/26/2007 12:03:46 PM

I have seen slow markets in my time but this one has to one of the slowest if not the slowest I have ever seen.

Linda Piazza : 12/26/2007 12:00:27 PM

The USDJPY is now at 114.08. It's still maintaining values above the neckline of its potential H&S. If it doesn't soon confirm that formation, at least by the close today or the open tonight, I would consider it invalidated. The right shoulder is beginning to stretch out a bit too long. Confirmation now would require sustained 15-minute closes below about 113.84.

Jane Fox : 12/26/2007 11:48:45 AM

Although the SPX and DOW charts mirror each other most of the time, the other large cap market we watch here in the monitor, the NDX, has closer ties to the Russell 2000, the small caps. LinkLink

Jeff Bailey : 12/26/2007 11:47:37 AM

S&P 500 Index (SPX.X) ... Last year's fractional gain from 12/21/06 close to 1/04/07 close hinted of a "BULLISH" year. 2008 "Santa Claus Rally" benchmark began at Friday's close Link

Jane Fox : 12/26/2007 11:44:50 AM

Earlier I showed a chart of the SPX's potential head and shoulders. Here is the "potential" head and shoulders on the DOW. Link

Linda Piazza : 12/26/2007 11:40:44 AM

While I'm listening to that webinar, I've got the SPX's chart unfolding on one of my monitors. The standoff continues: 15-minute closes below the 15-minute 9-ema, now at about 1491.97, and 15-minute closes above the breakout benchmark, now at 1488.55.

Jane Fox : 12/26/2007 11:40:08 AM

WASHINGTON (MarketWatch) -- Home prices in 20 major U.S. cities were down 6.1% on average in the past year as of October, according to the Case-Shiller price index released Wednesday by Standard & Poor's.

Since October 2006, prices in 10 cities fell 6.7% -- a record drop. The prior largest decline was 6.3% in April 1991.

"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert Shiller, chief economist at MacroMarkets LLC and co-developer of the index.

Eleven of the 20 metro areas posted a record low annual growth rate, and six of the metro areas posted double digit declines. Also, all 20 metro areas declined from the prior month.

San Diego posted the largest decline of 2.6%.
Miami sustained the largest drop over the past year, with a decline of 12.4%. Next came Tampa, with a drop of 11.8%; Detroit, with a drop of 11.2%; and San Diego, with a drop of 11.1%.
Home prices are going to decline "considerably further" in coming quarters, likely reaching a double-digit pace on a year-over-year basis, according to Joshua Shapiro, chief economist for MFR Inc.

"Given conditions relating to mortgage financing, and the number of unsold homes that is piling up, all regions are likely to continue on a negative trend in the months ahead, and those with the greatest oversupply (at the bottom of the pack at the moment) will continue to fall by the most," wrote Shapiro in a research note.

Three areas -- Charlotte, N.C., Seattle, and Portland, Ore., -- were the only ones still experiencing positive annual growth rates in home prices, according to the report. Charlotte gained 4.3%, Seattle gained 3.3% and Portland gained 1.9%.

Both the 10-city and 20-city composites declined 1.4% from September -- their single largest monthly decline on record.

October's results mark the 10th consecutive month of negative annual returns, and the 23rd consecutive month of decelerating returns, according to the report

Linda Piazza : 12/26/2007 11:38:18 AM

What do you do on slow market days to keep yourself from entering trades out of boredom? I try to educate myself. This morning, I've gone to the CBOE's "Strategy and Education" webinars section, listening to a webinar on "common sense technical analysis." The guys presenting the webinar make a point that hadn't occurred to me before, as simple a concept as it is. We retail traders trade in isolation. That isn't true of most professional traders. If you're a professional trader and you've taken on too much risk, and the end of the day approaches, some higher up in your organization is likely to "tap you on the shoulder and say 'flatten out your position,'" the webinar presenters say. Good point. Can you find someone who will advise you similarly?

Jeff Bailey : 12/26/2007 11:33:04 AM

Current OPEN MM Profiles that I've made and Watch List found at this Link

Keene Little : 12/26/2007 11:19:57 AM

The techs look a little more bullish than the others this morning but the bounce off the lows for all of them looks corrective (choppy overlapping highs and lows) and that points to another leg down in the pullback. But the risk for both sides in trying to trade today is choppy price action in a 4th wave correction.

Linda Piazza : 12/26/2007 11:05:14 AM

So far, the SPX continues to maintain 15-minute closes below the 9-ema, now at about 1491.90. That's slightly in the bears' favor, but only slightly since the 9-ema has flattened and not turned down. The SPX maintains 15-minute closes above the breakout level, and that's slightly in the bulls' favor, but only slightly, since the SPX hasn't been able to sustain values above the 9-ema while RSI climbed off its low. So far, since the VIX maintains levels that have erased its breakdown level, I'd have to give the slightly bearish interpretation a little more weight, but until and unless the USDJPY confirms that H&S and then starts moving strongly down, I don't know that we can count on much downside in equities.

Linda Piazza : 12/26/2007 10:54:30 AM

The USDJPY has dropped back again to 114.00. Currently, it would require sustained 15-minute closes beneath 113.85 to confirm that head-and-shoulders formation on the 15-minute chart.

The SPX just closed its last 15-minute period at the 15-minute 9-ema now at about 1492.40. That shows that it held on that 15-minute closes, but the SPX is still testing it, with the SPX now at 1492.00. The SPX remains in breakout mode on the Keltner chart, but what short-term bulls don't want to see now is that 9-ema continuing to hold on 15-minute closes while RSI cycles up. RSI has risen from its early morning low to 50.37 as I type.

... One reason I felt QQQQ bulls should look to take some profits today is from the above chart.
Again, we've seen a VERY BULLISH 5% bounce since Wednesday and with the NASDAQ's daily NH/NL ratio (see NH/NL column AH) now at 47.6%, a large part of an "oversold" bounce may have been largely had.
With some profits booked, I think bulls would look for another bull entry on a pullback, near QQQQ $51.00, and look for the Santa Claus rally (last 5days of year and first 2 in January).

... The above NYSE NH/NL ratio chart looks quite similar to the NASDAQ's NH/NL ratio chart, and I would have to analyze this important internal indicator of bullish leadership and bearish leadership depicting an "oversold bounce," at this point.
To become more than that, I would need to observe a 5-day NH/NL ratio at 52%.
One "message" I feel that BOTH the NYSE and NASDAQ Comp. internals suggest is that the RECENT LOWS are now VERY IMPORTANT levels of support.

... Not only have we observed some a/d ratio's reverse up from "oversold" levels, but both the shorter-term 5-day NH/NL ratios at the NYSE and NASDAQ have also reversed up at today's close.
On 12/20/07, the NYSE's 5-day NH/NL ratio (column AE) fell to 10.3% (as close as 10.3% is to 10.00%, it isn't 10.00%, so we chart to 12%). See how close this ratio was to its 11/21/07 inflection low measure of 7.1%? For this shorter-term ratio to generate a "buy signal," we would need to see a ratio of 52% (above the 12/11/07 inflection high). To see a "sell signal," we would now need to observe a 5-day NH/NL ratio of 10.00%, which would be just under the recent 12/20/07 inflection low. Even though this shorter-term ratio has reversed back up, I keep its color "red" as it hasn't shown the bullish MOMENTUM to quite get it above its more intermediate-term 10-day NH/NL ratio (column AF) of 22.0%, which is still edging lower at 22.0%.
Here's a chart of the NYSE NH/NL ratio, where it helps the trader and investor better understand the quantitative data from the table.
Note where the NYSE Daily Ratio (column AD) is at (45.5%). If we are to see the NYSE 5-day NH/NL ratio get a "buy signal" at 52%, what does the daily ratio have to do at a MINIMUM?

... For a second-straight session, advancers easily outnumbered decliners by nearly 3:1 at the NYSE, while NASDAQ reported a narrower 4:3 margin.
One "reason" I suggest bulls lock in some gains from this tremendous bounce is that the NYSE 5-day advance/decline ratio (column M) is right back at ratios found on 12/3 and 12/10.
When I look at today's NYSE new highs of 100, that's not as bullish as I would think a BULL wants to see compared to Friday's 100 new highs.
Point here would be that we're probably seeing the SAME 1, 2 and 3-lettered names making the new high list, but not really seeing others join in despite today's +0.87% price gain for the NYSE Composite ($NYA.X) 9,873.48.
Something I would continue to monitor.
However, you can begin to see how "oversold" the NYSE 5-day A/D ration was on Monday (12/17/07) at 29%, and what type of rebound we've seen in this internal measure.
Charted on a point and figure scale of 2%, it would take a 5-day A/D ratio measure of 54% to see a 3-box reversal lower (60% on chart - 6% = 54%), and it would take a still higher measure of 65% to see a "buy signal" (above the inflection high from 12/3/07). It would currently take a 28% measure to generate another "sell signal", where 38% would be just below the 12/17/07 inflection low of 29% (charted to 30% on a 2% box chart).
Here, we could assess NYSE A/D 5-day ratio as a BULL RISKING a 61% measure down to 54% near-term (3-box reversal) and then further to 28%. At what seemed to be an important 62% on 12/3/07 and 61% on 12/10/07, then bulls should be disciplined here.
The NASDAQ a little stronger near-term. This isn't overly surprising considering the longer-term. Again, I continue to monitor should we see a "shift" as was witnessed earlier this year with the Russell 2000 ($RUT.X).
At today's close, we see the NASDAQ A/D 5-day ratio (column T) reaching 60%, and that's enough to generate a "buy signal" above the 12/10/07 inflection high of 56%. Not unlike the NYSE's a/d ratio, it would take a 3-box reversal lower measure of 54% to signal some weakness near-term, and a decline to 30% to generate a "sell signal," which would be below its 12/17/07 inflection low of 32%.

Jane Fox : 12/26/2007 10:13:24 AM

TRIN at +1.20 is bearish but that is an "improvement" as well from from a high of +1.53.

Jane Fox : 12/26/2007 10:11:52 AM

VIX is making new daily lows so that tells me the bulls are getting stronger.

Linda Piazza : 12/26/2007 10:12:13 AM

The SPX has been retesting its breakout benchmark. Meanwhile, the VIX, moving in opposition generally, not only tested but also bested its breakdown benchmark, seen as the purple channel line on this chart: Link
Notice that RSI poked above 70. It may be time for RSI to cycle down. Short-term bears want the VIX to consolidate sideways if it does. Short-term bulls want that channel support to be lost and for the VIX to cycle down, too.

Jane Fox : 12/26/2007 10:11:08 AM

AD line is a bearish -864, an improvement from -906.

Linda Piazza : 12/26/2007 10:05:18 AM

Equity traders should note that the USDJPY is now at 114.10. After approaching but not yet testing the neckline for the H&S on its formation, the values shot right up to 114.17 before dropping back a little. That wasn't high enough to invalidate the formation, but it certainly shows that the confirmation of that formation is not assured. The USDJPY would now have to sustain 15-minute closes below 113.86 to confirm that formation.

Jane Fox : 12/26/2007 10:03:27 AM

I expected this would happen. The rally from the December 18th low at 1435 needed to slow down and retrace at some point so the right shoulder of a head and shoulders would need to form. So this is where the rubber hits the road for bulls - the bulls need to make sure this retracement does not close below the Dec 18th low and confirm this head and shoulders. Link

Linda Piazza : 12/26/2007 10:03:11 AM

The SPX dropped down to test that Keltner support just above 1487 that I had mentioned in a previous post. That's now at 1487.29, a little lower than it was earlier this morning. As I said then, short-term bulls don't want to see the SPX sustain values below about 1487 and then start finding resistance on 15-minute closes on tests of the 15-minute 9-ema. The 9-ema is now at 1492.02, but trending down. The SPX is at 1489.59 as I type.

Keene Little : 12/26/2007 9:59:42 AM

As I play with Fibs and channels (not all of which are shown on this SPX 15-min chart) I'm thinking price could be choppy for the rest of this week while it works its way higher to 1510 (for the bullish wave count). The bearish wave count says the rally has already finished and we'll see a decline get started. It takes a break below 1480 to get me thinking the bears could be winning. Link

Jane Fox : 12/26/2007 9:40:45 AM

Does anyone want to take a guess what the US$ is doing today? If you guessed it is down you are right. The US$ is now testing its lower trendline and where I think it will find support. So we have the US$ at support and Gold and Crude at resistance. This may take a few days to play out but, here I go out on a limb again, but I think Gold's and Crude's resistance will hold and the US$'s support will hold. Link

Linda Piazza : 12/26/2007 9:39:15 AM

USDJPY now at 113.99.

Linda Piazza : 12/26/2007 9:37:44 AM

On a short-term Keltner basis, the SPX has potential support in the 1487.33 and 1489.12 levels, on 15-minute closes. Of course, we all know that 1490 is branded in everyone's brains as potential support, too, but short-term bulls don't wang to see the SPX sustain values below 1487 and then start finding resistance on each test of the 9-ema.

Jane Fox : 12/26/2007 9:33:52 AM

Gold has broken out of the triangle I have been showing for the last few days but is now heading for another line of resistance at about 823. Link

As you can see Crude had broken out of its triangle and is heading for resistance as well at about $95.00. Link

Jane Fox : 12/26/2007 9:27:23 AM

Bears ruled the overnight session but were not able to retrace Monday's gain. It should be a very quiet session today and I am not sure if I will trade or not. If I do the setup will have to be very clear with no ambiguities. Link

Linda Piazza : 12/26/2007 9:24:06 AM

Further continuing my 9:20:23 post: If confirmed, the head-and-shoulders formation on the USDJPY's 15-minute chart would project to a downside target near 113.30-113.40. Before our markets open, it's difficult to assess whether the formation will be confirmed or invalidated by a sharp rise in the USDJPY from the neckline test. Also, whether it confirms or invalidates, I can't yet assess whether it would be one of many ducks-in-a-row validations of whatever equities are doing at the moment or a heads-up that something might be wrong. Just watch it and realize that its direction often leads equities.

Linda Piazza : 12/26/2007 9:21:41 AM

Continuing my 9:20:23 post: Supposedly, the action in currencies is purer or cleaner technically than that in equities, which would render such H&S formations more important on the currency charts. I haven't always agreed with that assessment, but I am watching the formation. It looks to me as if we'd have to see a 15-minute close below about 113.86 before we would consider that formation confirmed. As I type, the USDJPY is at 114.02. (To be continued . . . .)

Keene Little : 12/26/2007 9:21:38 AM

Good morning and I hope everyone had a wonderful Christmas day. It looks like the bulls got a case of indigestion from too Christmas dinner but I was looking for a pullback today and then a continuation higher.

The Nasdaq has a pretty clean pattern to the upside for its rally off the Dec 18th low. It looks like it needs a pullback correction and then another push higher to finish the leg up. A Fib projection (for two equal legs up from Nov 26th) at 2748, especially if it first pulls back to about 2693, makes for a good upside target: Link

The bullish wave count for SPX shows a pullback and then rally up to its downtrend line from October, currently near 1511. It should then pull back again before charging higher. The bearish wave count says the rally could fail here or at the downtrend line but it will take an impulsive decline (no choppy overlapping highs and lows forming a bull flag) and a break below 1464 before the bulls are in trouble: Link

I'm showing how a bullish outcome for the DOW might look on its daily chart. It's a bit messy but looking at the green price path I'm showing the possibility for a rising wedge to develop as it works its way higher into February/March. If this plays out it's going to be some ugly trading with lots of chop and whipsaws (as we've been seeing since July): Link

If we've got a sideways triangle playing out since July then we should get another pullback to the bottom of the triangle near 12800 (shown in light green) before we see a new rally leg into next year. With the economic fundamentals that we're facing I don't see how this could happen but I'll let price be the decider here. A break below 13092, the Dec 18th low, would say we're on the light green path or possibly something more bearish. These levels are shown a little better on the 120-min chart: Link

The bears are not back in control until the August low near 12518 is taken out but a drop below the 12725 November low would be a heads up. A drop below 12518 would negate any and all bullish wave counts that are currently on the chart. But until that level is violated the bulls are firmly in control of this market so be looking to buy dips for now (just be careful about buying near resistance levels).

Linda Piazza : 12/26/2007 9:20:23 AM

Good morning. I hope everyone had a relaxing day away from the markets.

I've been taking a look at what happened with the USDJPY while we were all away from the markets. It had been rising into a new recent high Wednesday, but it spent yesterday trending down to test support. Up until about 4:00 am ET this morning, it rebounded, but hit a lower high before starting down again about 4:00. What all that does is complete a head-and-shoulders formation on the 15-minute chart, with the first shoulder having been churned out Friday, the head Monday and the second shoulder during the overnight action last night. (To be continued . . . .)

Jane Fox : 12/26/2007 9:19:44 AM

TEL AVIV (MarketWatch) -- Berkshire Hathaway will purchase 60% of Marmon Holdings, an industrial group owned by trusts benefiting members of the Pritzker family of Chicago, for $4.5 billion, the companies said on Tuesday.

Berkshire, the investment firm controlled by the Omaha investor Warren Buffett, also will acquire the rest in stages over five to six years, with payment based on earnings.

Marmon, with annual revenue of around $7 billion, holds more than 125 manufacturing and service businesses worldwide. They include wire and cable, railroad tank cars, flow products for plumbing and construction, construction-equipment leasing, water-treatment equipment and more.

Jane Fox : 12/26/2007 9:18:05 AM

WASHINGTON (MarketWatch) -- Home prices in 20 major U.S. cities were down 6.1% on average in the past year as of October, according to the Case-Shiller price index released Wednesday by Standard & Poor's. Since October 2006, prices in 10 cities fell 6.7% -- a record drop. The prior largest decline was 6.3%, reached in April 1991. "No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert Shiller, chief economist at MacroMarkets LLC and co-developer of the index.

Jane Fox : 12/26/2007 9:16:46 AM

Dateline WSJ = Spurred by heavy discounting, U.S. shoppers spent furiously in the days just before Christmas. But holiday retail sales appeared to still fall short of industry expectations, according to new data, setting the stage for bigger markdowns in the increasingly important post-Christmas period.

The 11th-hour rush helped strengthen a weak holiday season. From the day after Thanksgiving to midnight Monday, total retail sales, excluding automobiles, rose 3.6% over the previous year, according to MasterCard SpendingPulse, a unit of MasterCard Advisors. But factoring out spending on gasoline -- which soared thanks to a 27% average price increase since this time last year -- retail sales increased a lackluster 2.4%. Industry forecasts had predicted gains of 3.5% to as high as 4.5%.